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ACCA Applied Skills · Corporate and Business Law (Global) · Alternative dispute resolution mechanisms

Corvo Co and Delmar Co use a mediator to resolve a supply dispute. After two sessions the mediator suggests terms, but Corvo Co rejects them. What is the legal effect of the mediator's suggestion?

The suggestion is not binding. A mediator only helps the parties reach agreement and cannot impose a decision. Terms bind the parties only if both accept them, usually through a written settlement agreement, so Corvo Co's rejection means no binding outcome exists.

  1. AIt binds both parties because the mediator is appointed by agreement
  2. BIt is not binding on the parties unless they accept it and record a settlement agreementCorrect
  3. CIt binds Delmar Co only, because Corvo Co has rejected it

Explanation

A mediator facilitates but has no power to impose a decision. Any outcome binds only if the parties agree and normally record it in a contract. Option 0 confuses mediation with arbitration.

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